VENKATARAMA REDDIAR Vs. VALLI AKKAL

JUDGEMENT

(1.) The plaintiffs appeal against the decree dismissing their suit in limine. They had obtained a money-decree against the first defendant and in execution thereof they attempted to attach a promissory note, dated 23 December, 1924, executed by the second defendant in favour of the third defendant and endorsed by the third defendant to the fourth defendant. The allegations in the plaint were that, with a view to defraud the plaintiffs of the amount clue to them under their decree, the first, third and fourth defendants joined together and got this promissory note executed by the second defendant in favour of the third defendant in respect of a sum of money really due by the second defendant to the first and that in pursuance of the same fraudulent scheme the note was transferred to the fourth defendant without any consideration. An application to attach this promissory note was dismissed, on objection raised by the fourth defendant, on the ground that the promissory note standing in his name or in the name of the third defendant could not be attached. This suit was then laid for a declaration that the promissory note is liable to be attached in execution of the decree obtained by the plaintiffs against the first defendant.

(2.) Issues 1, 4 and 5 were argued as preliminary issues in the Court of the First Instance and that Court held that the present suit was one to obtain relief "on the basis of the promissory note and on the promissory note alone", that neither the first defendant nor the second defendant could be allowed to prove that the third defendant did not advance the amount for the promissory note or that his endorsee the fourth defendant is not entitled to recover the amount due there under and that as the plaintiffs could have no higher rights than the first defendant, the suit must fail. On appeal, the Subordinate Judge, in a very brief judgment, also held that it was not open to the plaintiffs to plead that the payee under the promissory note is not the fourth defendant but somebody else. Hence this Second Appeal.

(3.) The Judgments of the Courts below rest upon a misapprehension of the observations in Subba Narayana Vathiyar V/s. Ramaswami Aiyar (1906) I.L.R. 30 Mad. 88 : 16 M.L.J. 508 (F.B.) and similar cases. It is not right to say generally that that class of cases lays down that parol evidence is not admissible to show that a note has been taken benami in the name of a person for money advanced by another. It is one thing to say that the promisor cannot, in a suit on the note, plead that somebody other than the payee is the person entitled to sue, nor plead discharge by payment to the alleged real owner, and a wholly different thing to say that as between the payee named in the document and persons other than the promisor there is any rule which precludes the admissibility of evidence showing that the payee was only a benamidar for another. The Negotiable Instruments Act lays down certain special rules of evidence and certain special presumptions and precludes certain pleas being raised in particular circumstances; but it will not be right to say that beyond the scope of such rules or what may follow as necessary implications therefrom, the applicability of the general principles of law or the ordinary rules of evidence is excluded. For instance, it may be noticed that in Secs.120, 121 and 122 of the Act, particular pleas are barred only in suits on negotiable instruments. In Secs.118 and 119, certain presumptions are laid down with reference to negotiable instruments, and in Secs.43 and 44 certain pleas, such as, absence of consideration, etc., are permitted to be raised between immediate parties but not as against other holders. By Section 117 of the Evidence Act an acceptor of a bill of exchange is precluded from denying that the drawer had authority to draw such bill and to endorse it. But beyond special rules thus enacted, there is no reason whatever, for holding that the ordinary principles of substantive law or the rules of evidence will not govern claims relating to negotiable instruments, especially where they arise not between the promisor and the promisee or the drawer and the drawee but between the promisee or drawee on the one hand and a third person on the other.